Question

Nitai, who is single and has no dependents, was planning on spending the weekend repairing his car. On friday, nitai's employer called and offered him $500 in overtime pay if he would agree to work over the weekend. Nitai could get his car repaired over the weekend at autofix for $400. If nitai works over the weekend, he will have to pay the $400 to have his car repaired but he will earn $500. Assume nitai pays tax at a flat 12 percent rate.

Answer 1

Answer: Nitai is better off working over the weekend.  

Explanation:  

When Nitai plans to work over the weekend, she gets $500 out of which she pays $60 (i.e $500*0.12) is tax. So, she is left with $500 - $60 = $440 income. If she pays for her repair which costs her $400 she will be left with $440 - $400 = $40.  

If she does not work over the weekend, she will have no income and she will have to pay no taxes. Neither will she have money to pay for her car repairs.  

So, Nitai is better off working over the weekend as she gets a surplus of $40.  

Answer 2

Nitai should work over the weekend.

Because according to the situation, if he works over the weekend, he will get $500. After deducting the tax, he would still have surplus amount to get his car repaired from the workshop. The offer is profitable, so he should go for the overtime option.

Now how he would have the surplus, following is the calculation

Overtime payment = $500

Tax percentage= 12%

Tax that he has to pay: 500*0.12= $60

Amount earned= $500 - $60= $440

Car Repairing Expense= $400

So, Amount in hand - Expenses = $440 - $400 = $40 (Surplus)

So this this the amount, he would still have in hand, if he works on the weekend.